Consumer Data Collection Strategies in Two-Sided Platforms: The Role of Data Ownership Assignment and Privacy Concerns

Abstract

Recognizing data as the new oil of the digital economy, two-sided platforms have invested heavily in collecting consumer data. However, issues surround privacy concerns and conflicts over data ownership. More importantly, should consumers retain ownership of their personal data? This paper models a two-sided platform under different data ownership structures and explores the effect of data ownership assignment, consumer privacy concerns, and network externalities on Consumer Data Collection (CDC) strategies. Game theoretic results suggest that, with a low data collection compensation, leaving data ownership with consumers increases the platform's inclination toward investing in CDC strategies when the cost of personal data protection is low and the loss of consumer data ownership is high. However, in cases with high data collection compensation, this inclination diminishes, indicating a decreased desire for CDC investment. Interestingly, when data ownership is assigned to consumers, heightened consumer privacy concerns lead to consumers providing less personal data, but the platform may be more incentivized to invest in CDC. Further, allowing consumers to hold on to data does not always increase consumer surplus, as the latter depends on the trade-off between the costs of data ownership shift (i.e., both personal data protection costs and data collection compensation) and the benefits attached to the data. When data collection compensation is relatively low, conflicting views on data ownership may arise between the platform and consumers.